No more "No Deposit Home Loans"

Say goodbye to “No deposit home loans”, and say hello to requiring a deposit of between 10 and 20 per cent of the purchase price of a home. From December 1 the Commonwealth Bank will only lend up to 80 per cent of the value of a home if you’re not prepared to pay mortgage insurance, whilst the ANZ will loan you up to 90 per cent of the purchase price.

This could have a negative impact on the anticipated flood of first home buyers that’s expected to hit the market. With Uncle Kevin giving them up to $14,000, that will leave first home buyers still needing to save an extra $31,000 before they can lay down a deposit on an average $450,000 home, and that could be beyond a lot of them. The banks are also going to be a lot tougher when it comes to assessing mortgage applications. This is already happening, with agents telling me that they’re seeing a sharp rise in the number of contracts falling over because people aren’t able to get finance.

With that in mind, I expect to see a rise in demand for low-cost units. For example, you can pick up a decent 2 bedroom unit in Coorparoo (5km from Brisbane CBD) for $300,000, which could be tempting for those who value inner-city living, but can’t afford a house.

Now, house prices could fall, but until they do then units could be the best option for first home buyers.